Doug Ryan, CFED & CFPB

With the Preserving Access to Manufactured Housing Act moving through the legislative bodies lending is a hot button issue in our industry.  Recently MHLivingNews has brought Doug Ryan under fire, building a case that the CFED (Corporation for Enterprise Development) is currently engaged in a conflict of interest with the CFPB (Consumer Protection Financial Bureau).  Both the CFPB and the CFED claim to be consumer advocates.  The CFPB aims to protect consumers from predatory lending while the CFED aims to make sure lending does not become regulated out of existence.  The case for the conflict of interest with Ryan is built on questionable funding. CFED receives a portion of their funding from the CFPB and Ryan refuses to disclose how large of a portion that funding is.

In the article by MHLN the CFPB is quoted as stating that the largest MH lenders are predatory and that the producers are greedy.  It would make sense that suspicion would arise when an organization accepts essential funding from another organization that is in direct philosophical opposition.  Though the article’s purpose was to discuss Doug Ryan and MHLN’s frustration with his actions, what I found most striking was the immense difference between funding for new homes and funding for used homes.  My business deals in new MH and the lending we use is a traditional mortgage, the same as a person would seek when buying an existing or site-built home. Conventional loans are a common occurrence with our new homes.  Hearing that regulation has become so tight that lenders who once helped consumers purchase used homes in the $20K and lower range have backed out of the market because originating smaller loans has become unprofitable is unfortunate.  The CFED makes the argument that sub-prime lending for used homes is not a danger to America’s financial infrastructure the way sub-prime lending led to the most recent housing collapse.   Even though this sub-prime lending does not pose a danger to society, on an individual basis, the structure of a sub-prime loan can still create a lot of stress and potential risk toward the borrower.

The arguments on both sides of the issue are compelling and each hold merit.   Predatory lending and putting profits ahead of ethical behavior is harmful to the society an institution serves.  Likewise, if an institution is unable to generate profits it cannot operate efficiently and will then fail to be capable of serving society.  Forcing people to conduct themselves ethically is a sticky tar pit, but as James Madison wrote in the Federalist Papers #51, “If men were angels, no government would be necessary”.

Advertisement

Mortgage Discrimination

Our in house finance consultant, DeAnna Trask, was passing an article around the office about mortgage denial for women on maternity leave. Click here for the article. I found the article very interesting and I didn’t think it had been an issue in the past but, this year there have been 16 incidents with at least three institutions. Some cases the lenders either denied the loan all together or stopped working on it. On October 9^th, HUD settled with Wells Fargo for $5 million, which is the largest settlement of its kind.

“Wells Fargo settled with HUD to resolve allegations that it discriminated against pregnant women, women on maternity leave, or women who recently gave birth by making loans unavailable based on sex and familial status; or by forcing women applicants to sacrifice their maternity leave and return to work prior to closing on their loans; and by making discriminatory statements to and against women who were pregnant or who had recently given birth.”  Click here to read the whole article.

One of the biggest problems regarding this type of discrimination is the lack of education.    The changes to Dodd Frank, the SAFE act and other federal law changes have greatly impacted and regulated our industry.  Tyna-Minet Anderson, vice president at Mortgage Educators and Compliance, said that underwriters and mortgage insures do not take the same training which many lead to a knowledge gap and fair lending.  HUD reported 30 cases of discrimination in 2010, 40 in 2011, 50 in 2012, and 40 in 2013.

I asked DeAnna to give us some insight on what we can do as dealerships to protect our deals and customers.  Here is what she had to say:

As a dealer, if you have a customer that is pregnant, you need to be aware of how this has worked in the real world.  If you’re doing an end loan, you could run into special underwriting guidelines that only pertain to women on maternity leave.   If the woman goes out on maternity leave before the deal is closed, an underwriter could do the following:

1. Refuse to count her income because she is on leave, effectively declining the loan.
2. Refuse to acknowledge that being on family medical leave does not mean that you’re unemployed.
3. Decline the loan altogether and make them resubmit when she goes back to work.
4. Or, put the loan on hold until she is back to work and has 30 days of paystubs.

All of these actions have been standard practice in the past.  However, all of these actions violate the Fair Housing Act of 1968.

Tiny House/ Park Model Trend

Tiny House/ Park Model Trend

Over the past couple of months I have noticed a growing trend with tiny houses.  Although I don’t think that all housing trends can translate into sales within our industry but I think that this trend might.  HGTV has several shows like “Small Space, Big Style” and shows about tiny houses from 110 sq. ft. up to 1,000 sq. ft.  They showcase homeowners that have made the most out of the limited space they have.   A growing number of people, whether young or older, are starting to appreciate the smaller living space.  Here are some stats I found:

–  68% of tiny house people have no mortgage compared to 29.3% of all U.S homeowners

–  55% of tiny house people have more savings than the average American, with a median of $10,972 in the bank

–  The average tiny house is 186 sq. ft. while the standard U.S home takes up nearly 2,100 sq. ft. That adds up to nearly 11.3 tiny houses!

–  Approximately 2 out of 5 tiny house owners are over 50 years of age

–  More women own tiny houses than men

These stats were taken from The Tiny Life.  The site offers an explanation of what the “Tiny House Movement” means and links to other “tiny house” blogs & websites.

Our industry offers park models as a version of “tiny houses” that we can sell!  I attended Titan & Commodore fall shows several weeks ago.   Both of the plants had a park model on display and they were perfect examples of how organized and efficient “tiny houses” can be.  I did some research on Athens Park Homes and Cavco Park Models & Cabins.  Both brands offer many different floor plans and options which include porch models, front kitchens, movable islands, wood interior accents, log siding etc.  Titan offers two complete series of Athens Park Homes and Cavco also offers two different series.  If you have time please check out their websites.  Click here for Athens Park Homes & click here for Cavco Park Models & Cabins.